Federal Employee Frequently Asked Questions
CSRS (Civil Service Retirement System) is a federal system offering a defined benefit pension without Social Security. FERS (Federal Employees Retirement System) includes a smaller pension, Social Security benefits, and the Thrift Savings Plan (TSP). Most current federal employees fall under FERS.
The TSP offers low-cost investment options but unfortunately, provides limited fund choices. Allocating among traditional and Roth TSP contributions depends on your tax outlook. Some federal employees benefit most from maximizing contributions and matching funds. The team at Compass Financial Group is uniquely qualified to help you determine the best allocations for your particular situation.
Your pension is based on your years of creditable service, average highest salary over three consecutive years (High-3), and a pension multiplier. Creditable service may include military service or unused sick leave, but only if properly documented and, in some cases, bought back.
WEP can reduce Social Security benefits for those with pensions from non-covered employment (e.g., CSRS). GPO affects spousal or survivor Social Security benefits. These can significantly reduce your expected income, so early planning is essential.
Federal Employee Group Life Insurance (FEGLI) becomes increasingly expensive with age. Compare FEGLI premiums to private insurance options as you approach retirement, especially if your needs have changed or dependents are no longer financially reliant on you.
Choosing a survivor annuity (typically 50% or 25% of your pension) reduces your retirement income but ensures continued income for a spouse after your death. Consider your spouse’s income needs, health, and whether other assets could provide support.
Strategic retirement timing—such as end-of-year retirements—can increase annual leave payouts and align with eligibility rules (e.g., MRA + 10, or age 62 with 5 years of service). Missteps can result in lower or delayed pension benefits.
Yes, if you’ve been enrolled in the Federal Employees Health Benefits (FEHB) program for the five years immediately before retirement. FEHB can be a valuable complement to Medicare, especially with coordination strategies in place.
TSP withdrawals are taxed as ordinary income and can impact your tax bracket. Consider blending withdrawals from TSP, pensions, and Social Security to reduce tax exposure. Roth TSP withdrawals are tax-free if qualified.
Many federal employees rely on peers or HR departments, which can lead to misinformation. Consult financial professionals with federal retirement expertise and review official resources such as OPM.gov and tsp.gov for accurate, up-to-date guidance.
